The Economy

I keep getting stuck on what I've learned of "lean" manufacturing principles and how hard it was for businesses to adapt to a more responsive and adaptive model of operations. Industrial behemoths could plod along, surviving off the enormous inertia they'd built over the decades. Some fell while others are still plodding along, yet unchallenged by efficient competitors that can't clear the entry barriers of the market, time will still come for them.

Governments are behemoths of a much more impressive scale. Their size lets them wield tools that no business is large enough to hold (monetary policy, "monopoly of violence"). Unfortunately inertia will always be overcome by time and friction in the form of a century of inefficient policy.

The fix isn't going to be found in dropping all forms of welfare or by jacking up tax rates to cover the continuing expenses of such programs, it will be found through guided reform. We need to base policy on facts and economic "facts" aren't universal, they're marginal and we need much more information and real world date to find those margins.

In my opinion the US needs a few big picture changes in order to start making informed policy reforms:

- States need to be given the room for experimentation that was intended our nations founders. The scientific approach to any problem requires a control group and when the federal government attempts to monopolize control at every level there's no room for comparison.

- To that point, there are many problems that can only be approached at a national level. The areas of defense, common natural resources, border controls, and interstate disputes of all types were wisely enshrined in the constitution as the domain of the federal government. While I'd like to hand as much power to the states as possible and others would like to handle things like healthcare at a purely national level, I think the wise approach would involve studying the international picture before jumping to any conclusions. Looking internationally we'd find that universal and mixed systems can be equally successful. Universal national systems (NHS), regional systems (Canada's provincial system), privately weighted mixed systems (Malaysia), and publicly weighted mixed systems (Germany) are all able to produce better outcomes than our attempt at a mixed system. So we must study, experiment and design, maybe we'd find that a provincial system would work best, maybe a national single payer system would work but despite years of debate we've ended up arguing over ideology. Ultimately we must have a system of reasoned debate and a legislative process capable of enacting the well-validated policy.

- Our electoral processes have resulted in a deeply divided, highly ideological country. There's no structural roadblock standing in the way of implementing well-researched policy as I've described, there are only political barriers. I can't think of a quick fix capable of changing millions of minds but I know that any slow shift like this degradation of political discourse can be reversed at the same slow pace. The solution is something that should have always been in the federal domain and that's our disjointed, uncoordinated redistricting processes. Centuries of gerrymandering have resulted in a map of districts engineered entirely for the purpose of furthering a party's political machine. The bent geography necessary for ensuring the "safety" of congressional seats is just a hair above the line of credibility if we are to consider our government "representative". The lack of fair demographic representation boxes us all in to neat little bubbles of ideology where few of us are allowed to express our political will in the face of an overwhelming majority opposition. We're the only country where districts are drawn by the interested parties and this needs to change. I believe it will push people out of their bubbles and hopefully bring about a stronger culture of political debate.

I have a few other ideas that are much less feasible but my tl;dr is that we need to start fostering a less divisive culture that will be receptive to taking a scientific approach to policy. Otherwise the lumbering dinosaurs called western democracies are going to fall so behind the curve that failure will become the only option.

That's it. The rest is just noise. It's just too easy to spend other people's money, under the guise of 'public interest'. Even if the politician is not corrupt, and not, say, channeling public funds to friends, outside of a few obvious cases (foreign invasion, giant earthquake, meteor strike, e.g.) it is difficult to hold politicians accountable for, say "good intentions gone awry".

The United States did quite well for a half century or so (only dipping into debt to pay for wars). There was the moral precept of 'no taxation without representation' and the early government understood that debt incurred the future taxation of people who would not be able to go back in time and vote against the spending[0]. That's all been abandoned long since.

[0] it is often said that "governments are not like families" and so that debt dynamics are different. Well, that is indeed the case. At least when individuals enter a debt, there is a contract of understanding between a single person and the lendee which means that the responsibility for repayment is on the borrower and the consequences of default are on the lender (except in a few morally questionable cases, such as academic debt). When governments enter debt, the payment is the responsibility of, potentially, someone else (there's the 'spending other people's money' again, except this time, at a societal level).

That's not at all the proper way to look at macroeconomics. Our economy is unimaginably complex -- it's full of hundreds and millions of moving parts, with each single part (the human brain) driven by an even more complex system with hundreds of billions of parts (neurons). All of these parts are re-orienting themselves with new data in real time.

What Sam is trying to say here, is that we don't know if these trends are "good" or "bad", or if they'll lead to bad outcomes or not, or in what time frame this will occur. All we know now -- and this I agree with -- is that something in our economy has changed permanently. And this should be a good cause to worry, or at least, should be taken as a call to arms to economists everywhere to try and figure out why our models aren't working as well as they used to.

    "Too large a proportion of recent "mathematical" economics are mere concoctions, 
    as imprecise as the initial assumptions they rest on, which allow the author
    to lose sight of the complexities and interdependencies of the real world in a 
    maze of pretentious and unhelpful symbols." - John Maynard Keynes

Things are getting better across the board, but that narrative won't sell. Doom sells.

It's possible to have good discussions about this, but it requires a lot more moderation than HN wants to do (rightly, in my estimation). And probably a different format: the threaded discussion format leads to all sorts of weird tarpits.